How to exploit long-term thinking in a short-term thinking company?
I have read the strategy document (written in Norwegian), written by some excellent investment advisors with recommendations for the Norwegian pension fund (the second largest investment fund in the world with 600 billion dollars). As this is a pension fund with a 20+ year investment perspective, the main advice was to exploit this long-term scope to invest in assets that normal investors would not have the patience for. One of the ways to do this is to create insurances (also heavily exploited by investment guru Warren Buffet). One of the insurances that could be sold is insurance against a financial crisis.
I am wondering whether something similar could be exploited by my company. My company works for medium to large companies. Some of these companies think almost exclusively short term. Some think one year ahead, some just one month ahead. Do you have any ideas how to exploit this differnce in time scope to earn more money? I specicially do not want to tell what I am working with, because I want this to be a general discussion on this topic.
1 Answer
Well, unfortunately most business owners or managers are thinking in short terms. At maximum they think about 5 years ahead. If you want to change that, you are trying to educate them, thus you need very good arguments. However, it is absolutely normal to think in short terms, if your business faces an economic downturn.
So, if you like people to invest in something which has an investment perspective of 20+ years, you need to show 2 important things:
- security of investment
- acceptable interest/return on investment
IMHO insurances against financial crisis bears a unforeseen risks. Anyone has to pay for the losses, if they may occure, though who will that be? Your Company? Another Insurance Company? Where is the profit for the investor?
If you just think about earning money from the different time scope of investments, I don't see any opportunity so far.
So, it depends on how good you could educate your clients to see the benefits of long term investments.
Hope this helps a bit.
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Thanks for your answer. I mentioned insurance as an example, not something I am in a position to exploit. I know that I cannot educate the companies to think longer-term, I just want to exploit it for my own benefit (and also their benefit of course). My question is how to do this. – David 14 years ago
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You could analyse the actual activities of a company to see which effects these activities might have (long or short-term). Furthermore you could analyse if the activities are recurring. Sometimes we are not aware of having a long-term focus or even any kind of focus, thus you could try the see these things in the actions which are taken. Another way is to review the companies strategy and categorize the actions from these strategies. As you could see, just try to change your own view, then you will find what you are looking for. – Abenetis 13 years ago
